Cyber Insurance

While cyber insurance policies have been around since 1997, only recently have they become popular. Many companies have started offering cyber policies. Because of the explosive growth of this industry and the diversity in policy coverages, it can be difficult to understand what you are buying. While there are professional agents that have taken the time to understand cyber policies, there many more out there offering policies without understanding what the polices cover. I will be doing a webinar on this topic later this month, but here is a brief summary of some key areas.

Policies typically contain 4 to 5 sections. They are the declarations, insurance agreement, conditions, exclusions and definitions. Knowing what is covered is just as important as knowing what is not covered. I can share many sad stories of companies that had cyber insurance, thought they were covered, but were unable to collect.

To help understand coverage, or lack of coverage, here is a brief summary of one of those sad stories that happened here in the Miami Valley.

The owner of a small business had his email password compromised. The criminals continued to monitor his email account for a while. The criminals were able intercept an invoice that included wire instructions. The criminals modified the invoice and changed the account number for the wire transfer. The business typically pays their vendors via wire and everything looked like business as usual. The business paid (wired funds to the criminals account) the invoice as instructed.

The company didn’t learn of the issue until their vendor asked for payment because they had not received it. By this time, it was too late, the money was gone.

The company notified the police, and their insurance company. They were not covered for this incident because it was not considered a theft. The owner of the company authorized the payment to the criminal. The language of the policy was specific on what would be covered and not covered. Because this was an authorized payment, they were denied coverage.

I can’t stress this enough, when shopping for cyber insurance, ask lots of questions and make sure you understand your coverage. It is always best to work with a professional!

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Posted by Jack Gerbs